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The Liberal Government and its supporters must stop kicking the unemployed
Gerard Jackson
Peter Saunders, the social research director at the Centre for Independent Studies, is upset with the welfare lobby because it refuses to endorse the way the Government penalises those who fail to fulfil the conditions of their benefits (The Australian, Charities must support rules, 28 August 2006). Penalties are incurred when welfare recipients breach what the Government calls their “mutual obligation requirements”. This is what the welfare lobby is attacking, and it was its response that led Saunders to ask: “First, should people be expected to work if they are capable of supporting themselves?”
Saunders has got it wrong — again (Liberal Government screws up labour market reform). Although I do not agree with the welfare lobby’s views on penalties I still think it is 100 per cent correct to attack the concept of “mutual obligation requirements”, a concept that gets Saunders’ cachet. He, and those like him, do not seemed to grasp that this concept implicitly assumes the unemployed to be a bunch of bludgers that need prodding back into work. Moreover, it completely eludes him that it is the rest of the country that is morally obligated to the unemployed, not the reverse.
As a member of the free market Centre for Independent Studies he should know that it is axiomatic in economics that if the services of any good are priced above its market clearing level a surplus will emerge because less of the good will be bought. As I frequently point out, the same applies to the services of labour. If labour prices its services in excess of the value of its additional product unemployment will rise and the number of vacancies will fall. This is precisely what happens when an effective minimum wage is imposed. (An effective rate is one that exceeds the market rate).
In English so plain that even an academic can understand it — what is being discussed is compulsory unemployment. The logic of this argument is that if anyone is under an obligation it is those who get to keep their jobs at the expense of those whose jobs have been destroyed. This leads to the conclusion that welfare payments to the unemployed should be treated as compensation for being denied employment.
The likes of Saunders could argue that this policy is wrong-headed — though I don’t see how — and that it would encourage people to abandon low-paid jobs for the dole. But if this were so then the number of vacancies would rise until they exceeded the number of unemployed. I have never known of a situation in which a high level of unemployment was accompanied by excess vacancies.
The phony concept of “mutual obligations” has fascist undertones that implies the unemployed are parasites that need to be whipped into line. I find this approach callous and insulting. Furthermore it is a thoroughly stupid. It diverts attention from the real cause of unemployment — which is the over pricing of labour. Perhaps this is why Mr Saunders focused on welfare changes rather than the real issue.
The Government’s ham-fisted approach to the unemployed is nothing new. More than three years ago Howard, Costello and Vanstone revealed their stunning ignorance of the fundamental cause of widespread persistent unemployment. That is why they started kicking the unemployed instead of job-destroying union leaders and their mates in the arbitration commission.
I have argued that if politicians and the electorate insist — for whatever reason — on supporting job-destroying policies then they have an obligation to compensate the victims of those policies. Bullying and slandering them is inexcusable and despicable. So how did Amanda Vanstone, then Minister for Family and Community Services, respond? With the sanctimonious statement that
[f]or the vast majority of people on welfare, the current mutual obligation requirements are appropriate.
This is a typical Tory response. It is completely beyond these people that they have no moral right — and that goes for their supporters — to implement fascist sounding policies like “mutual obligations” until they fully liberate the labour market. To attack the unemployed because they have been priced out of work is cruel and cowardly.
But where do the likes of Costello get their ideas on unemployment? It couldn’t by any chance be the Toorak set? It seems there are some from this very wealthy suburb who have decidedly reactionary ideas about the unemployed. Of course, if you have always been financially well off with the right social connections unemployment would be something that only idle members of working class indulge in. It therefore follows that the unemployed are basically responsible for their own predicament. (I really wish I was making this rubbish up).
It’s ideas like “mutual obligations” that make this lot come across as pack of callous economic illiterates. It says a great deal about their intelligence that some of them can simultaneously entertain diametrically opposed views on the jobless, to wit: though they have been forcefully kept out of work they are still dole bludgers who need to be bullied into working.
It’s about time these Tories substituted economic reasoning for doublethink and stopped bullying the unemployed.
Gerard Jackson is Brookes’ economics editor
BrookesNews.Com
Monday 4 September 2006